An overview of consumer data and credit reporting

Federal Reserve Bulletin, Feb, 2003 by Robert B. Avery, Paul S. Calem, Glenn B. Canner

Credit reporting companies gather the information that is in a credit record primarily from creditors, government entities, collection agencies, and third-party intermediaries (see box "Sources of Credit Reporting Company Data"). Reporting entities submit information to credit reporting companies on a purely voluntary basis; no state or federal law requires creditors or others to report data to the companies. The FCRA prohibits a reporting institution from furnishing any information to a credit reporting company if the institution knows or consciously avoids knowing that the information is inaccurate, and it requires institutions to participate in the process of correcting errors that are identified by consumers.

Sources of Credit Reporting Company Data

Credit reporting companies receive the information that
is included in credit records from a wide variety of
sources. They receive information on individual credit
accounts, which makes up the bulk of the data that they
maintain, from virtually all commercial banks, savings
associations, and credit unions; from most finance companies;
and from major retailers and many other businesses,
such oil and gas companies. Some utility and
medical companies also report on their accounts.

Credit reporting companies also gather information
from many agencies specializing in collections. These
collection agencies may be acting on behalf of a claimant,
or they may have purchased the rights to an account
themselves. Collection agencies report information on
accounts in collection, including many non-credit-related
bills, such as those associated with medical treatment or
services from communication or power companies, as
well as some credit accounts.

Collection agency reporting does not represent a full
accounting of credit accounts that have gone to collection.
Many creditors do their own collections rather than
using collection agencies. If these creditors report to the
credit reporting companies, such collections will appear
as updates to credit account files. However, if the creditor
does not report to the credit reporting companies, then
these collection actions will not appear in the credit files.

Credit reporting companies also gather information on
public records, obtaining the information from the court
system, government entities, or third parties. Some of
these sources have computerized, comprehensive records;
others keep only paper records that require labor-intensive
transcribing and recording. The former are
easily obtained by credit reporting companies whereas
the latter are not. Finally, information on inquiries is
recorded by the credit reporting companies as the inquiries
are made.

The national credit reporting companies attempt to collect comprehensive information on all lending to individuals in the United States, and the information each maintains is vast. (6) Each of the three national credit reporting companies has records on perhaps as many as 1.5 billion credit accounts held by approximately 190 million individuals. Credit reporting companies receive information from creditors and others generally every month, and they update their credit records normally within one to seven days of receiving new information. According to industry sources, each of the three national credit reporting companies receives more than 2 billion items of information each month.